UK to Widen Bank Regulators' Power: FT

Reuters

Friday, 4 Jan 2008 | 6:30 AM ETReuters

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Britain this year will give regulators greater power to intervene early when financial institutions run into trouble to avoid a repeat of the Northern Rock crisis, finance minister Alistair Darlingsaid.

Alistar Darling

"I want to make sure our own legislation is up to the mark in dealing with problems when they arise in future," Darling was quoted as saying in an interview with the Financial Times, published on its Web site.

The Treasury, Bank of England and Financial Services Authority share responsibility for financial regulation and came under fire for their handling of funding problems at Northern Rock, which triggered the first bank run in more than a century.

Darling said primary legislation to be introduced in May would include giving the FSA greater powers to monitor banks' liquidity as well as their capital requirements. The problems at Northern Rock stemmed from its inability to raise cash after a sharp spike in money market rates.

He also said he was looking at other countries' systems which allow regluators to step in if banks hit certain "trigger points." Legislation would be introduced after a three-month consultation.

"What we have been doing is looking at some models in different parts of the world -- America, Canada, for example, and Belgium -- where regulators can appoint someone when you reach various trigger points if institutions get into trouble and you have to help to support it," Darling said, according to a transcript of the interview on the FT Web site.

The finance minister will also look into current insolvency laws under which banks are treated no differently to other companies and which made a covert rescue of Northern Rock impossible, as well as to improve protection of depositors' cash.

"To make sure there is no doubt about how much money is guaranteed and also to make sure people can get out their money fairly quickly," Darling was quoted as saying.